Update March 6, 2025: On March 6, 2025, President Donald Trump suspended the 25% tariffs he had imposed a few days earlier on March 4, on most goods from Canada and Mexico. The exemptions will expire on April 2, 2025, when Trump has warned of implementing reciprocal tariffs globally.

Key Points

• Since the beginning of his second term, Donald Trump has announced new tariffs, affecting Canada, Mexico, and China. A 10% tariff on Chinese imports was implemented on February 4, 2025, with further 25% tariffs planned for Canadian and Mexican goods starting March 4, 2025. These tariffs are presented as a national security measure, justified under the International Emergency Economic Powers Act (IEEPA) to combat illegal immigration and drug trafficking.
• Nearly half of all U.S. imports originate from Canada, Mexico, and China, making these tariffs highly consequential. Analysts estimate that the U.S. tariffs could reduce total imports by 15% while generating an additional $100 billion in annual tax revenue. The tariffs are expected to raise consumer prices, disrupt supply chains, and result in higher production costs for businesses.
• Economists predict that Mexico’s GDP could decline by 4% if tariffs remain in place throughout 2025. The automotive, agriculture, manufacturing, and energy sectors will face serious financial strain.
• Prime Minister Justin Trudeau condemned the tariffs as unjustified and announced retaliatory 25% tariffs on U.S. goods. Meanwhile, President Claudia Sheinbaum also announced retaliatory measures while emphasizing her preference for diplomatic negotiations.
• Diplomatic discussions led to a temporary pause in tariff enforcement, with Canada and Mexico increasing security cooperation to address U.S. concerns over fentanyl trafficking. Despite last-minute diplomatic efforts, Trump reaffirmed that the tariffs will take effect on March 4, 2025.
• The tariffs disrupt cross-border supply chains, increasing vehicle costs and potentially causing job losses. Tariffs on Mexican and Canadian agricultural products are likely to increase food prices in the U.S. while hurting North American farmers. Similarly, steel and aluminum tariffs will raise production costs for multiple industries, including aerospace and construction. A 10% tariff on Canadian energy exports will presumably drive up fuel and electricity costs in the U.S.
• The USMCA agreement is under strain, with Canada and Mexico exploring alternative trade partners. Trump’s policies risk undermining North American economic cohesion, creating long-term uncertainty. Higher inflation, economic instability, and weakened diplomatic ties are anticipated to result in long-term damage to U.S. relations with its closest allies.